U.S. equity futures futures bumped higher Monday, while the dollar eased modestly against its global peers and Treasury bond yields steadied, as investors looked to claw back loses from the worst week for domestic stocks in more than three months heading into the final nine trading days of the worst year for stocks since 2008.
A combination of weaker-than-expected economic activity data, alongside a surprisingly hawkish rate decision from the Federal Reserve, pummeled U.S. stocks last week, with the S&P 500 falling some 2% to close at 3,852.36 points, extending its year-to-date decline to just over 19%.
Similar sentiment is likely to grip markets this week, with volumes expected to be light ahead of the traditional holiday slowdown and an absence of major economic data releases outside of the housing sector.
Bond markets, meanwhile, continue to express recession concerns, as well as doubts over the Fed’s projection of a 5.1% Fed Funds rate in early spring. Benchmark 2-year note yields were marked modestly lower at 2.182% in overnight trading, while 10-year paper held at 3.520%/
The U.S. dollar index, which tracks the greenback against a basket of its global peers, slipped 0.15% to 104.549, powered in part by a firmer Japanese yen and reports of a potential rate hike from the Bank of Japan sometime in early 2023.
Housing and mortgage data will likely be in focus this week as investors track the impact of the Fed’s renewed hawkish rate signaling and the ongoing pullback in consumer and construction demand.
The National Association of Homebuilders will published their benchmark sentiment survey Monday, with Housings starts and building permits data from the Census Bureau following on Tuesday.
The Mortgage Bankers’ Association will update on benchmark mortgage rates, new applications and financing demand Wednesday, followed later that day with existing home sales for the month of December. New home sales data is expected on Friday.
Three key earnings reports to flag over what is effectively the final trading week of the year include updates from Nike (NKE) – Get Free Report, FedEx (FDX) – Get Free Report and General Mills (GIS) – Get Free Report on Tuesday and Micron Technology (MU) – Get Free Report after the closing bell on Wednesday.
Markets were also tracking developments overnight in China, where authorities recorded their first Covid fatalities in several weeks amid the slow re-opening of the world’s second-largest economy following nearly three years of aggressive lockdowns.
Heath officials elsewhere remain worried that a rapid change in China’s Covid rules could result in a wave of infections and a surge in deaths, particularly given its poor record on vaccinations.
China’s edge towards reopening has added a bid to oil prices, however, which edged modestly in overnight trading, supported as well by reports that the U.S. government is looking to begin replenishing the Strategic Petroleum Reserve with a fixed price purchase of 3 million barrels.
WTI contracts for January delivery were marked 49 cents higher at $74.78 per barrel while Brent contracts for February, the global pricing benchmark, added 98 cents to trade at $80.01 per barrel.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are indicating a 7 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 40 point bump. The tech-focused Nasdaq Composite is looking at a 32 point advance.
Global stocks were mixed, with Japan’s Nikkei 225 falling 1.05% to close at a six week low of 27,237.64 points amid the BoJ rate talk, while the region-wide MSCI ex-Japan index fell 0.06%.
In Europe the Stoxx 600 was marked 0.53% higher following its worst week since September, while the FTSE 100 was up 0.52% in London.